Wall Street: Apple Will Post First Quarter Of Negative Income Compared To Year Ago In Ten Years

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The consensus on Wall Street seems to be unanimous: for the first time in decade, Apple will report lower income this quarter than it did the year before. But don’t panic: even Wall Street doesn’t think Apple’s era of profitability and innovation is at an end.

Fortune reports that the current consensus on Wall Street is that Apple’s estimated earnings per share for Q1 2013 will be around $10.18, down from $12.30 in Q2 2012. If you want to know why Apple stock just keeps plummeting, there’s your reason
(although Fortune’s Philip Elmer-Dewitt says “the smart money has been pouring back into the coimpany for the past three weeks.”)

Why are earnings per share projected to be down? Well, mostly, it has to do with the fact that Apple refreshed pretty much every product it had in Q1.

The problem for Apple is not that its business is collapsing. Indeed, the projected revenues of $41 to $43 billion Apple offered analysts in its quarterly guidance would represent another record second quarter for the company.

Rather, it’s what analysts call a “tough compare” in terms of gross margins — a measure of the efficiency with which a company turns revenue into profits. Last year at this time Apple’s gross margin peaked at an extraordinary 47.37%. This year, following the introduction of a slew of new products — including new Macs, iPhones and iPads — it is projecting gross margins somewhere between 37.5% and 38.5%. That’s what’s driving the income down. Wall Street seems to be betting that in the next six to 12 months, those numbers have nowhere to go but up.

In other words, Apple is innovating so quickly and releasing such advanced products across the board at such an aggressive rate that it’s maximizing profit on them less quickly than a year ago. If Apple had a more staggered release schedule right now, their earnings-per-share would still be pretty high, if not higher than a year ago.

The good news here is that the landslide of AAPL share price might soon be at an end… following the release of a slate of new and exiting 2013 Apple products.

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  • Whodakat

    I hope the stock tanks. Don’t get me wrong, I’m a huge fanboy, its just I don’t have enough money to throw at their stock while its at $450+ a share. Come on $200 a share! LOL

  • technochick

    Seems to me that the bigger issue is analysts making comments like this to drive down the share price so they can buy in lower. And then when they are wrong the price goes back up and score.

  • MrsCleaver

    “The consensus on Wall Street SEEMS to be UNANIMOUS”

    Huh? How do those two things jibe?

    First of all, Wall Street doesn’t know. Second, if it were “unanimous”, there would be no “seem” to it. Third, even if “negative income” (whatever that is) turns out to be true, it’s not because Wall Street knows; it’s more likely that all the negative comments over the last year or so regarding the passing of Apple’s management from Steve Jobs to Tim Cook have caused nervousness about Apple, and therefore a downturn in the stock. Nonetheless, the same great products are being designed, made and purchased in record numbers (globally, no less), and Apple is strong and stable.

    It’s human nature on full display. We love a winner, until the winner starts doing better than we think it should do, then we root for it to lose… and often make it so in the process.

  • dcdevito

    @technochick:

    Blue Horseshoe loves Anacott Steel

About the author

John BrownleeJohn Brownlee is a Contributing Editor. He has also written for Wired, Playboy, Boing Boing, Popular Mechanics, VentureBeat, and Gizmodo. He lives in Boston with his wife and two parakeets. You can follow him here on Twitter.

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